Understanding Demographic’s

It’s important to understand that while we divide demographic data from psychographic data, most demographic data is actually a subset of cultural data. What people of different ages and genders are likely to be doing and thus are likely to buy has a lot to do with their culture. Further, things like age involve certain shared experiences which shape peoples’ thinking, and it is these shared experiences that are the reason why people of different ages think differently.
What makes demographics appealing is that they can be quickly learned. This means that it is often easiest to break target markets into demographic information. Most traditional ad media, such as magazines and televisions shows, release information about the demographics of their consumers. Certainly, in many cases such a broad categorization of people can be highly useful. Airwalk, for example, found that it could target people based primarily on age, and that their ads would work worldwide allowing them to expand quickly. On the other hand, any large demographic group can have subsets that are not always in agreement on everything. Further, any group you might not normally consider in your target demographic can have large subsets who are interested in your product. This means that great care needs to be taken when selecting demographic targets because more and more demographic lines are growing thinner. Oftentimes, what you’ll find is that demographic variables need to be paired with psychographic ones based on people’s emotions, values, beliefs, and interests.


http://highered.mcgraw-hill.com/sites/0070898332/student_view0/chapter18/video_cases.html

Age
Every age group has certain things that are likely to speak to them; songs that they love, TV shows that they watched, major events that shaped the way they think about the world. A picture of Kennedy means something different to someone who was old enough to vote for or against him than it does to someone who was born 30 years later. These shared moments make age an important target for many companies and in many ways can turn age into a psychographic variable.

It’s common for companies to seek after younger age groups, for example, as it’s often presumed that these consumers are more likely to select a new brand. However, it’s important to keep in mind that the vast majority of the money is owned by older consumers. So many other companies have found great success promoting themselves to older consumers, including American Girl, a maker of children’s dolls, that realized that middle-aged aunts and mothers were the ones buying dolls for their seven-year-olds. By choosing to work to gain the approval of older consumers for a product intended for children, American Girl was able to sell its dolls for four times more than other doll companies could. Further, American Girl grew from a few million to a few hundred million dollars in sales at a time when the doll industry shrank by about 50 per cent.

Dove Body Wash for men has also been targeting older males having found what they believe to be an important, underserved niche market. They have met with initial success, but it’s still early to tell if it’s going to be long-term success. Keep in mind, however, that age groups are often not stable. Many companies that focused on this demographic have found that their target grew up on them causing their tastes to change. Further, shared experiences can only take a company so far. Not everyone protested against the war in the Sixties; only a handful of people became Goths in the Nineties, and only a small percentage of the population watches any given TV show now.

http://www.businessweek.com/smallbiz/content/jun2009/sb20090612_217280.htm

Income
Although income might seem like an important target, some customers, after all, certainly can’t afford certain products. Luxury brands, however, have become a moving target according to Wharton:

“Today, it is much more difficult to conjure up a consistent picture of luxury living. People may live in expensive homes and drive luxury cars but purchase Evian water by the case at Costco and live with barely any furniture,” he said. "They might have two bean bag chairs, but they have the car.”

Yes, it is true that the point of targeting is to choose the people most likely to buy a product, and certainly people with higher incomes are seemingly more likely to buy expensive cars. In many cases other demographic or psychographic information will serve to refine a target better. Education, for example, often leads to greater support of the arts. An interest in fashion or image can lead people to purchase products that seem to be out of their price range. Still, because income is often quoted by the media in which you might place your ads, it can be useful for making traditional print and geographical decisions. After all, neighborhoods are often most easily divided by housing prices, and census data is based on income not interest.

http://knowledge.wharton.upenn.edu/article.cfm?articleid=1126

Geography
People in different areas are also more likely to know each other and are more likely to have shared opinions and experiences. Beyond this, where someone lives influences where they shop. So if you own a retail store, geographic targeting needs to be included in your marketing mix. How big this geographic region is depends on the type of store you have. Some restaurants can draw people for miles while a small corner store is likely only able to draw people from a few blocks.

If you don’t own a retail store but are planning to sell products to retail stores, geographic targeting is still important for you in selecting which stores to send salespeople and other promotional materials to. Sometimes such geographic selections are based on other demographic information within the target area but not always. For example, Seattle buys more books per person than nearly any other city does so publishers can take advantage of this by targeting Seattle stores over others. Kinko’s has used geography as one of its primary demographics--not based on who lived in the areas they located in, but what types of businesses were located in the area in order to target people who could afford and would need quick printing jobs.


Features of a Good Target

Easy to Reach
Your target needs to be easy for you to define and reach with your promotional efforts. You should be able to explain who your target market is, how many people are in your target market, and the best ways to market your products to them on a single page. If you can’t do that, then you need to better refine your target market.

Responsive
Some people hate to be advertised to; they dislike the types of promotions you can afford to do, etc. Unless you have found some other way to reach out to these people, you shouldn’t include them in your target market. You should look for people who are most likely to respond to your ads, which is why I created “Wiki Targeting” as a means of discovering who is most likely to respond to your promotional method.

Semi-Permanent
Many target demographics come and go. Flappers, for example, helped to define the early part of the 20th century, yet within a few years after 1930 they had all but disappeared. Today, hipsters are beginning to grow away from their temporary culture and, as a result, companies which catered to them, such as American Apparel, are losing money and in danger of losing relevance altogether. It’s important that you pick a target that will be around for a while or that you be prepared when that target changes.


Financial Evaluation

Some of the greatest ideas have seemed financially infeasible or have had no basis with which to evaluate their viability. At the same time, however, many seemingly great ideas have failed when a simple evaluation would have let their founders know that they needed to come up with additional concepts and change strategies to make the business work. This is what makes evaluation tricky because, on the one hand, over-evaluation can kill great ideas while, on the other hand, a lack of evaluation can allow you to think that a bad idea is great. My experience, however, has been that businesses tend to under-evaluate. Indeed, out of the dozens of businesses I have been involved with, none have over-evaluated. I have just heard of this danger. General evaluation doesn’t have to be a complex task. Basic wiki targeting and a review of general census data can give a business a pretty good idea of how things will work.
There are three things you need to determine in a financial evaluation:

1 ) The number of members in your market.
I cannot emphasize the importance of this enough especially for niche retailers. I remember the case of one business which failed to do this. The business was designed to serve upper, middle-class parents in an up-and-coming neighborhood. Everyone seemed to think that their opening was a good move and their business model was sound. They received loans, grants, and other forms of support. Yet they didn’t remain open for a full year because their neighborhood only had a few hundred upper, middle-class parents which made it impossible for them to survive.
Never assume there are enough people to support your business. You should always at lease see how many people there are of a given interest or population. You can check populations of an area using census data and interest by checking Facebook’s ad service to see how many fans there are of a service or Google’s Keyword Tool to see how many people are searching for a service. While neither of these gives perfect estimates, they are useful for evaluating general interest and the ease with which you can advertise to those with a general interest.

2) Spending habits of the market.
It’s important to know how much money people are likely to spend on your products in a given year. Census data usually provides some fairly good information on average household spending. In addition, you can look at various industry sizes and divide these by the population to learn what an average person spends on something. Finally, surveys are a good way of learning about a specific market. Of course, for many new innovations, such as new products or the development of new target markets, there is no way to know for certain what people will spend on them. In such cases you really do have to take a chance.

3) Who your competition is in a market.
Who you’re competing against and what their strategies are will alter your strategy. You need to evaluate how many of your customers your competitors are likely to be able to keep when you enter the market.

4) Cost to serve.
Whether because of their media preferences which require you to spend more on marketing costs or because of their expectations, some targets cost a lot more to serve than others. You need to determine what it will cost to serve any one group so that you can subtract that from your expected earnings.

Caution--Too much evaluation will cause you to miss important factors. I don’t think you should be excessive in determining the value of any niche. I have just seen too many businesses that opened children’s boutiques in neighborhoods which had young college students, so no one had kids, or made similar mistakes. It’s important that there at least appears to be enough people in your target for you to earn money.